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State Rep. Wants To Make Court System More Accessible

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A new bill that aims to help more Vermonters access courts without the expense of a laywer is raising questions about debt collectors' use of small claims courts.

When Rep. Maida Townsend (D-Chittenden) introduced a bill to increase the amount that can be collected in Vermont Small Claims Court from $5,000 to $10,000, it seemed like a way to help more Vermonters access the courts without the expense of a lawyer.  

Townsend introduced the bill at the urging of a constituent.

“As my constituent put it to me an email, he said he hoped ‘that this would give poor people double the opportunity to use the court system,’” Townsend explains.

Traditionally, small claims have been used to settle disputes between individuals or between consumers and local businesses. Some people hire lawyers for small claims cases and jury trials can be requested, but in the majority of cases, plaintiffs and defendants resolve disputes one-on-one. Side judges and lawyers often hear small claims cases and judgments are rendered on the spot.

"As my constituent put it to me an email, he said he hoped 'that this would give poor people double the opportunity to use the court system.'" - Rep. Maida Townsend

Earlier this month, the House Judiciary Committee took testimony on Townsend’s proposal.

Vermont Supreme Court Justice Geoffrey Crawford told lawmakers that in recent years there has been a shift away from traditional cases involving local disputes.

“More recently, the debt collectors have begun to use it and they have become more and more the customer for small claims and probably would be the principal beneficiary of any change in the limit,” Crawford said.

Crawford estimates that up to three quarters of small claims cases are filed by out-of-state companies attempting to collect credit card debt. There were 5,221 small claims cases in Vermont last year. The majority are claims by collection agencies that buy major credit card companies’ bad debt for pennies on the dollar and then try to collect.

Vermont Legal Aid attorney Jean Murray told the committee she opposes raising the limit.

Currently, claims above $5,000 must go through Superior Court, where lawyers represent clients, judges preside, the formal Rules Of Evidence are observed and a discovery process is used to gather information. Except in rare cases where there is a jury trial, those elements are not part of small claims proceedings. 

Murray says because third-party debt collectors often have limited information about the nature of the debts they have purchased and the defendants' obligation to pay them, they have a harder time making their case in Superior Court. 

She says the companies also present misleading information. She cites the case of a Michigan-based debt collection agency that does business in Vermont and was fined by the Federal Trade Commission.

Vermont Legal Aid Attorney Jean Murray is concerned that doubling the limit will allow the companies to prevail in cases in Small Claims Court that they could not win in Superior Court, because small claims standards are not as rigorous.

Murray is concerned that doubling the limit will allow the companies to prevail in cases in Small Claims Court that they could not win in Superior Court, because small claims standards are not as rigorous. 

“If they want to enforce the debt that they don’t have anybody’s signature on, that they don’t have the traditional forms of proving that somebody made them a promise to pay them a debt, that’s their risk to take. I don’t think they get to come into court and enforce that debt,” Murray says.

Last year, Vermont tightened rules governing the information debt collectors must present. Murray says she’s not sure whether the new rules will improve the process. 

As a legal aid lawyer, Murray spends about half her time defending people in debt collection cases. She says many people loose default judgments because they don’t show up to defend themselves in small claims court. Parties who win small claim judgments can use property liens, or take money from bank accounts or wages to collect debts.

Raising the small claims limit would also have an impact on court resources, according to Administrative Judge Amy Davenport. She estimates three additional court staff would be needed to handle the anticipated increase in cases if the limit is doubled.

No witnesses appeared on behalf of the debt collection industry, but the director of a Washington-based consumer group called Responsive Law told the committee his groups support raising the limit even further. Tom Gordon said small claims courts are the only place where ordinary people can resolve their disputes without a lawyer.

Townsend says until the committee testimony, she had not been aware of the use of small claims court by debt collectors. She says she still supports the increase in small claims limits, but she’s not optimistic about the prospects for her bill.

A bill to increase the limit in small claims court has also been introduced in the Senate.

Another house bill would allow small claims defendants to request that Rules Of Evidence be observed, without requiring a jury trial.